fedgazette

Beyond oil and gas: Trusts built on other natural resources

Ronald A. Wirtz - Editor, fedgazette

Published September 3, 2013  |  October 2013 issue

Oil and gas are not the only natural resources available to states for building trusts. Many states derive significant income from timber, coal and other resources from their public lands and have modest trust funds as a result.

For example, Wisconsin’s Common School Fund had assets of $880 million in 2012, according to the Board of Commissioners of Public Lands. The majority of assets came through the outright sale of federal lands gifted to the state, with annual contributions from timber sales on remaining state lands, as well as from civil and criminal fines, fees and forfeitures, and the sale of unclaimed property. The fund’s earnings benefit the state’s K-12 libraries, which received $30 million in the most recent school year to purchase books, computers and web-based resources.

Minnesota’s Permanent School Fund has similar assets ($842 million at fiscal year-end 2012). State trust lands generated $33 million in mineral, timber and other tax revenue the previous year. That money goes to the school trust, which in turn distributed $24 million to K-12 schools.

South Dakota also has a Common Schools Trust, with $143 million in assets—lower than other district states because the state has no appreciable oil or gas deposits, or large timber stands. The fund earned about $9 million in revenue in fiscal year 2012, most of it from investment returns, and distributed $7.4 million to K-12 school districts.

Montana earns about $200 million annually from oil and gas severance taxes, but none goes to a permanent fund. At the same time, the state receives about $50 million a year from coal severance taxes, half of which goes to the Permanent Coal Trust Fund, which had assets at the end of fiscal year 2012 of about $525 million. The state also has a Common Schools Fund, with $475 million earned through grazing fees, timber sales, and oil and gas production royalties on state lands.

Sizable trust funds can be amassed without oil and gas revenue. Since 1981, Arizona has produced about as much oil and gas as Texas pumps out in two-and-a-half days. Yet the state receives considerable revenue from public land sales, land leases, royalties from mineral mining and other sources. The state’s public lands earned the state more than $200 million last year, a portion of which goes to the Permanent Common School Fund, which currently stands at $3.8 billion.

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